By Melissa Akin and Polina Vorobieva
MOSCOW, Oct 31 (Reuters) - Russia's benchmark share index clocked its worst month on record on Friday after investors dumped Russian assets and traders appeared uncertain that gains from a rally this week would hold.
With a loss of more than 36 percent, October marked the worst monthly loss ever for the benchmark RTS index, unrivalled even in the aftermath of the Russian economic meltdown of August 1998.
The RTS index underperformed the MSCI Emerging Markets Index by around 10 percent, though it showed a modest 1.93 percent rise on Friday and is up around 20 percent so far this week, keeping it on track for the best weekly showing for the Russian benchmark since its creation in 1995.
"The worst of the credit crunch is over, but that the global recession is just beginning. We hold that view on a global basis and a Russian basis," Renaissance Capital said in a market comment on Friday.
Renaissance said that even its traditional equity clients made a beeline for the bond market this week, eschewing soaring blue chip shares in favour of less liquid quasi-sovereign corporate bonds, signalling distrust of the equity gains.
"To mangle a phrase from the Obama campaign, we are not sure the last four days' change is change that we can believe in."
Local trade was suspended limit-down on Monday and there is one trading day left in the week on domestic exchanges. The government moved a business day to Saturday to compensate for public holidays on Monday and Tuesday.
Helped by rallying Western markets, an influx of state money has slightly improved sentiment in Russia, where the index has slumped 80 percent from its May peaks to levels not seen in nearly four years.
On Friday evening, the index was down 69 percent from its May 19 record.
The government has been spending around 5 billion roubles ($188.4 million) per day buying stock, the chief executive of Development bank, the state agent of a 175 billion rouble stock market bailout package, said on Thursday.
"The market has calmed down and that's good," ING trader Denis Gorvat said.
Trade sources at Russian and Western banks said investment funds showed modest buying interest in the Russian stock market in recent days, but liquidity in many Russian shares remained very poor, making it difficult to fulfil orders.
And with Russia's hedge fund industry in chaos and some funds still coping with redemptions and margin calls, some traders said heavy selling was possible with the rally.